The High Price of a Toxic Company Culture

Dr. Jan West, Ph.D.

A toxic company culture will erode an organization from its core by paralyzing its workforce, diminishing its productivity, halting virtually all innovation and curtailing its enthusiasm for serving customers. A stifled, oppressive atmosphere is possibly the most powerful signal of a toxic culture, as well as the presence of aggressive behavior and negativity.

Aggressive behaviors can be indirect, taking the form of hostile jokes and teasing and/or undermining the work and accomplishment of others. It may be direct as well; shouting, ridicule, excessive criticism, bullying and scapegoating are all hallmarks of a toxic company culture. When an organization embraces blame as a blood sport, it is safe to say the company is in peril. Negativity permeates the organization, eroding the morale of the workforce and leading to chronic anger and anxiety among the staff. These are all symptoms of a toxic company culture, but how does this cancer begin?

Set a PACT

The loci of the problem may be one “bad apple” who can have a powerful effect on a workgroup, but regardless of the source, a toxic culture will flourish when there is no PACT between leadership and employees, or Professionalism, Appreciation, Consistency, and Trust.

Professionalism gives structure and order to the organization by developing a set of standards that employees are required to adhere to. When management fails to act in a professional manner or does not address unprofessional behavior among its staff (e.g. by firing bad apples, bullies, or toxic employees), it is throwing out the rulebook that is imperative to keeping a solid moral foundation.

Appreciation is necessary to ensure employees feel content, valued and willing to put in the extra effort needed to make the organization succeed. It may be intangible – taking the form of praise for work well done, or tangible – such as financial rewards or remuneration for specific accomplishments. When employees feel overworked and underpaid—and they believe their contributions go unnoticed or they are held to unreasonable standards—negativity will flourish.

Consistency is essential to nurture a feeling of security and attachment to the organization. It provides a stable foundation that allows employees to focus their attention on work and creating added value. When management responds to staff turmoil with mental calmness, composure, and evenness of temper, especially in a difficult situation, they set a precedent for employees to follow. The ability to rely on management to provide stability in the workplace environment is essential, because it sharply defines behavioral expectations in employees.

Trust is the final component of a healthy and productive workplace. Without trust, employees do not feel secure revealing their weaknesses, and as a result, insecurities fester. Employees become eager to blame others for their mistakes and focus more on building defenses rather than building the business. Distrust leads to stressed employees who are then suspicious of managerial and employee motives. Ultimately, the price of a toxic company culture is Failure, which can be conceptualized in terms of the three Fs: Frustration, Fear, and Financial setback.

A Failing Grade

Frustration is both rampant and inevitable in these circumstances, because employees will end up working in different directions and at odds with each other since there is no harmony or consistency in the organization. Due to low employee morale, accomplishing the simplest tasks may become difficult. As a result, the organization becomes sluggish and unresponsive, a state that will greatly impact the customer service experience.

Fear is a powerful motivator, and in toxic companies, the motivation is simply to keep one’s head down and stay out of the firing zone. As a result, employees only feel capable of doing enough work to get by. Their energies are consumed by worry, and they are afraid to attract attention to themselves because attention is never positive. This means they are unlikely to have the confidence to deal with customers effectively or push the strategy of the company forward. Ultimately, this will lead to considerable lost opportunity costs, because the focus becomes not innovation, but stagnation.

Financial setbacks are unavoidable for organizations with toxic company cultures. Substantial fiscal losses are incurred due to absenteeism, lower productivity, turnover costs, lost opportunity costs, and withholding of effort due to a lack of enthusiasm. As a result, more resources will be required simply to maintain status quo, and all the while, competitors will gradually gain the upper hand. As time passes, the organization will dig itself deeper and deeper into an emotional and financial pit, a fate that could have been prevented by a simple PACT.